The Federal Reserve inadvertently released what is a weak July industrial production report about a 1/2 hour early this morning. Headline production rose 0.2 percent vs expectations for 0.3 percent with manufacturing output showing outright contraction, at minus 0.1 percent vs Econoday’s consensus for a 0.2 percent gain. Capacity utilization hit expectations at 76.7 percent.
A 3rd straight decline in motor vehicles, down 3.6 percent in July, held down the month’s production. Excluding vehicles, manufacturing rose 0.2 percent. But also not helping were business equipment, down 0.5 percent in the month, and construction supplies, down 0.4 percent. On the plus side with small gains are consumer goods, materials, and non-industrial supplies.
Outside of manufacturing, mining posted a 4th straight solid gain, at 0.4 percent, with utilities swinging higher with a 1.6 percent July increase.
This report, which is the first definitive look at July’s factory sector, is unexpectedly flat and puts an end to the run of recently strong economic data. Strength in sentiment surveys like this morning’s Philly Fed do not always match the real world. Vehicle sales were up in July but it has been a tough year for the sector. And given the decline in this report’s manufacturing component, the upward momentum that the factory sector was showing looks less certain now.
Industrial Production vs Capacity
Econoday says this report breaks the string of recently strong data. I strongly disagree. Yesterday’s anemic housing report did. For details, please see Housing Starts Unexpectedly Sink, Multi-Family in Huge 34% Retreat Year-Over-Year.
Finally, recently strong retail spending reports are questionable. The BLS says motor vehicle sales rose 1.2% in July following a 0.9% gain in June. This is unbelievably bizarre in the face of actual auto sales reports.
Mike “Mish” Shedlock